Basic Entrepreneurial Marketing Principles

CSU NorthridgeDept. of Marketing

Franck VIGNERON

“Marketing creates Needs” ...

“Makes People Buy Things...”

?

“Marketing creates Needs” ...“Makes People Buy Things...”

Marketers can not create needs. Marketers can help people

articulate their needs into wants. Marketers can help create wants. Marketers seek to create

satisfactions

What Motivates a Consumerto Take Action?What Motivates a Consumerto Take Action?

NeedsNeeds - states of felt deprivation including physicalphysical needs for food, socialsocial needs for belonging and individualindividual needs for self-expression. i.e. I am thirsty.

WantsWants - form that a human need takes as shaped by culture and individual personality. i.e. I want a Coca-Cola.

How Do Consumers ChooseChoose Among Many Products and Services?

How Do Consumers ChooseChoose Among Many Products and Services?

Customer Value Customer Value - difference between the value the customer gains from owning and using a product and the cost of obtaining the product.

Customer Satisfaction Customer Satisfaction - depends on the product’s perceived performance in delivering value relative to a buyer’s expectations.

Both are closely linked to Quality Quality and Total Quality Total Quality Management (TQM)Management (TQM).

Customer Satisfaction

Expectation

PerceivedPerformance

Disconfirmation Satisfaction

The extent to which a product’s perceived Performance matches a buyer’s expectations.

Other Applications of Marketing

Person Marketing: Mkg efforts for getting attention, interest, and preference of a target toward a person, e.g., Celebrities (Shaquille O’Neal) or political candidate (Bush).

Place Marketing: Visitors, improve image, real estate, …

Cause Marketing: “friends don’t let friends drive drunk”

Event Marketing: Sporting, cultural or charitable activities; Salt Lake City 2002 Winter Olympics

Organization Marketing: Navy = “let the journey begin”

What is a “Problem”?

Problem: perceived difference between an ideal and actual state

The Ideal State

Expectations

Aspirations

Cultural basis

Effect of Changes in Life Basically: values, needs and goals

The Actual State

Actual Physical Situation

External Prompts

How to “Create” Problems for Consumers

Create new ideal state

Create dissatisfaction with actual state

Where do People Search for Problem Solutions?

INTERNAL

EXTERNAL

Memory /Thinking

Word of mouth, media,store visits, trial

CATALOG

Psychological Core

Need Recognition

Information Search

Evaluation of Alternatives

Purchase Decision

Postpurchase Behavior

The Buyer Decision ProcessThe Buyer Decision Process

1/ Problem Recognition& 2/ Decision Making

IdealState

ActualState

Intensity of Discrepency

Less than Minimum Treshold

No Recognitionof Problem

Greater than Minimum Treshold

InformationSearch

EvaluateAlternatives

BuyPost-PurchaseEvaluations

ProblemRecognition

SatisfactoryInternal Search?

ExternalSearch

Yes No

Attributes

Brands

A Model of Consumer Decision Making

INPUT

PROCESS

OUTPUT

A Simple Model of Consumer Decision Making

Firm’s Marketing Efforts1. Product2. Promotion3. Price4. Channels of distribution

Sociocultural Environment1. Family2. Informal sources3. Other noncommercial sources4. Social class5. Subculture and culture

Need Recognition

Prepurchase Search

Evaluation of Alternatives

Psychological Field1. Motivation2. Perception3. Learning4. Personality5. Attitudes

Experience

Purchase1. Trial2. Repeat purchase

Postpurchase EvaluationOutput

Process

Input

External Influences

Consumer Decision Making

Postdecision Behavior

THE PLANNING PROCESS

1.

2.

3.

4. 5.

6.

Marketing EnvironmentMarketing Environment

Company

Macroenvironment

Microenvironment

The Marketing EnvironmentThe Marketing Environment

Company

Demographic

Economic

Natural

Technological

Political

Cultural Company

Customers

Intermediaries

Suppliers

Competitors

Publics

?????????????????????????????

What the mix? What is the MKG mix? What are the 4 Ps?

Four Ps of Marketing

MarketingMix

TargetMarket

PricePromotion

Product Place

What is a Product?

Convenience Shopping Specialty Unsought

Goods Services Places Organizations People, etc..

Types of Types of Consumer ProductsConsumer Products GENERIC term that IncludesGENERIC term that Includes

Entrepreneurs vs Managers

Source: http://www.entrepreneurship-isemi.com

What is a SWOT Analysis?

5 Eyes Marketing Strategy

Past

Present

Future

Yourself

Competitors

Situation Analysis

S

W

O

T

Things the company does well.

Things the company does not do well.

Conditions in the external environment that favor strengths.

Conditions in the external environment that do not relate to existing strengths or favor areas of current weakness.

SWOT

Do not limit the S and W to the Product Threats: focus on specific competitors Opportunities:

• Do not describe what you will do. EG, develop a market development strategy based on the growing senior population

• Avoid basic opportunities: population growth, economic slow down, health consciousness, obesity rate, gaz prices,…

• Identify opportunities outside the product/consumer level

BENCHMARKING = Analyzing Competitors

Identifying the company’scompetitors

Assessing competitor’s objectives, strategies,strengths and weaknesses,and reaction patterns

Selecting whichcompetitors toattack or avoid

Assessment of strengths and weaknesses of competitors.

Marketing Strategy and TacticsMarketing Strategy and Tactics

A marketing strategy is a means by which a marketing

objective/goal is to be achieved, usually characterized by a

specific target market and a marketing program to reach it.

Marketing tactics are detailed day-to-day operational decisions

essential to the overall success of marketing strategies.

Generic Marketing StrategiesGeneric Marketing Strategies

MarketPenetration

MarketDevelopment

ProductDevelopment

Diversification

Four Basic Types of Strategic Opportunities

MMAARRKKEETT

PPrreesseenntt

NNeeww

PresentPresent New NewPRODUCTPRODUCT

Overall CostLeadership

Differentiation

Focus

Middle ofthe Road

Basic Competitive StrategiesE-machines or Wal-Mart Subaru or IBM

Leica or Mephisto Sears or Holiday Inn

Competitive Leadership

Operational Excellence

Alaska Airlines/Dell

Customer Intimacy

Ikea/VW

Product Leadership

Intel/Sony

Companies Gain Leadership Positions by Delivering Superior Value to their Customers Through These Strategies:

Market LeaderMarket Leader

Market ChallengerMarket Challenger

Competitive Marketing Strategies

Market FollowerMarket Follower

Market Nicher

Developing an Effective Marketing Program

Requires analyzing marketing problems/opportunitiesThis analysis has 3 steps and is grounded in primary and secondary marketing research data

Once an opportunity has been identified marketing strategy must be developed

CustomerAnalysis

CompetitiveAnalysis

Analysis ofOrganizationCapabilities

OpportunityIdentification

3 generic strategies for achievinga differential advantage overcompetitors are available:

•Product Differentiation•Overall Cost Leadership•Special Market Focus Offering ProductDifferentiation & Low Cost

Strategies Lead to Tactics

Direct our promotion to

males, ages 25 to 40 years old.

Advertise in magazines read by this

group of people

Advertise on television programs

watched by this group

..

Possible Tactics

Strategy

..

High Level Strategies1

HOW ??????

Low Level Strategies

2

Tactics

3

HOW ??????

..

..

..

Market Penetratio

n

NPD

Market Development

Diversification

PRODUCT

Existing

Existing

New

New

Market

PRODUCTPRODUCT

PRICEPRICE

PLACEPLACE

PROMOTIONPROMOTION

High Level Strategies

Low Level StrategiesTactics

1

2

3E.g., Quality, Branding & Service, …

E.g., skimming, captive, …

E.g., direct, indirect, exclusive, hybrid, …

E.g., skimming, captive, …

STP Segmentation Targeting & Positioning

Market Targeting

Market Positioning

Market Segmentation

Marketing Differentiation Strategy

AUndifferentiated Marketing

B Concentrated Marketing

C Differentiated Marketing

Company Marketing MixCompany Marketing Mix Market

Target 1Target 2Target 3

Target 1Target 2Target 3

Company Marketing MixCompany Marketing Mix

Company Marketing Mix 1Company Marketing Mix 1Company Marketing Mix 2Company Marketing Mix 2Company Marketing Mix 3Company Marketing Mix 3

Marketing strategiesMarketing strategies

Two-Way Brand Extension: Marriott HotelsTwo-Way Brand Extension: Marriott Hotels

QualityPri

cePri

ce

High

Economy Superior

Fairfield Inn(Vacationers)

Standard Good

Average

Low

Courtyard(Salespeople)

Marriott(Middle

managers)

MarriottMarquis

(Topexecutives)

Four Ps of Marketing

MarketingMix

TargetMarket

PricePromotion

Products Place

Branding

The Sam's Club logo used from the 1990s until 2001.

The second Sam's Club logo used from 2001-2006.

The current Sam's Club logo used since 2006.

BRAND AWARENESS

BRAND ASSOCIATIONS BRAND QUALITY

BRAND LOYALTY

•Familiarity Liking • Help Process & Retrieve Information

• Differentiate/ Position

•Create Positive Attitudes/ Feelings

• Reason-to-Buy

• Line Extensions

• Create Reassurance

• Time to Respond to Competitive Threats

• Reduced Marketing Costs Trade leverage

Managing and Building a Brand Knowledge

Recall versus Recognition

Perceived Meanings

Brand can possess an appealing image that consumers value directly

Expected Performance

Price Sensitivity & Purchase rate

Individual Product Life-Cycles Programmed to Yield Expanding Company Sales

Time Time

sale

ssa

les

Individual Product Sales

Total Company Sales

P1

P2

P3 P4 P5 P6 P7P8

Managing product lines and brands over time:The Product Life Cycle (PLC)

Total Industry Sales

time

-

MarketGrowth

MarketMaturity

MarketIntroduction

MarketDecline

Total Industry Profits

+

+

Product Life-Cycle Stages and Marketing Steps

TimeTime

SaleSaless

INTRODUCTIONawareness

and trial

GROWTHMaximize

share,grow market

LaunchLaunch TakeoffTakeoff RapidRapidgrowthgrowthShakeoutShakeoutMaturityMaturity DeclineDecline

MATURITYMaximize profit,

Defend Mkt Share

DECLINE Reduce/

Delete, milkthe brand

Product Strategies

Stages in the Adoption ProcessStages in the Adoption Process

Awareness

Interest

Evaluation

Trial

Adoption

Adopter Groups

2.5%

Innovators

13.5%

EarlyAdopters

34%

EarlyMajority

34%

LateMajority

16%

Laggards

Buyer behaviorBuyer behavior

Elements of the MKG MixElements of the MKG Mixthat compose a cohesive MKG programthat compose a cohesive MKG program

PlaceOutletsChannelsCoverageTransportationStock level

PromotionAdvertisingPersonal sellingSales promotionPublicity

PriceList priceDiscountsAllowancesCredit itemsPayment period

ProductFeaturesBrand namePackagingServiceWarranty

Marketingmanager

Cohesive marketing mix

PromotionPlace

Price

PromotionPlaceProduct

MKG PLAN

I. EXECUTIVE SUMMARY

• A stimulating summary of the marketing plan

II. CURRENT MKG SITUATION

• Internal Analysis: Strengths & Weaknesses

• External Analysis: Opportunities & Threats

III. ISSUE ANALYSIS

• Evaluate Potential Strategic Alternatives

• Recommend Alternative(s)

IV. MARKETING OBJECTIVES

• The goals to be achieved through the marketing plan in such areas as customer satisfaction, sales volume or market share

V. MARKETING STRATEGIES

• Overall Strategies & STP - used to achieve the objectives

VI. ACTION PROGRAMS

• 4P’s - that will be used to achieve the objectives

• Programs that pinpoint who is responsible for the marketing activities and that establish budgets and timetables for executing the MKG strategies

VII. CONTROLS

• Procedures for monitoring the plan over time and for taking corrective action if needed

Memo

New Products from SonyNew Products from Sony

1950s 1960s 1970s 1980s 1990s 2000s

2000s:•MD Walkman•Cyber Shot•DVD Handycam

1995: PlayStation video-game system captures 80% of U.S. 32-bit market.

1985: 8mm Handycam arrives.

1979: Walkman revolutionizes personal stereo tape players.

1982: Compact- disc player becomes first digital consumer electronics product

1975: Betamax VCR has initial success but loses out to better-marketed VHS VCRs.

1968: Its Trinitron TV becomes and remains the standard for color TV quality.

1955: First Japanese transistor radio starts its record of successes.

1946: Sony founded in bombed-out store. Its rice cooker never gets to market.

Strategic Roles of Most Successful New ProductsStrategic Roles of Most Successful New Products

Strategic Role

Defend marketshare positionEstablish footholdin new marketPreempt marketsegmentMaintain position asproduct innovatorExploit technologyin new wayCapitalize ondistribution strengthsProvide a cashgeneratorUse excess oroff-season capacity

Percentage of responses

0 10% 20% 30% 40% 50%

Externally driven

Internallydriven

IdeaGeneration

IdeaScreening

ConceptDevelopmentand Testing

MarketingStrategy

BusinessAnalysis

ProductDevelopment

TestMarketing

Commercialization

Major Stages in New-Product Development (Fig. 9.1)

The Research ProcessThe Research Process

STEP1: Defining the Problem and Research Objectives

STEP 2: Developing the Research Plan

STEP 3: Implementing the Research Plan

STEP 4: Interpreting and Reporting the Findings

Secondary Secondary DataData

Data that has been collected for reasons other than the

specific research project at hand.

Primary Primary ResearchResearch

Original research undertaken by individual

researchers or organizations to meet

specific objectives.

Designing Primary Research

Quantitative studies more likely for collecting descriptive information.

• Qualitative studies may be used to get new ideas.

Quanti Research

Quali Research

Marketing Research ProcessStep 1. Defining the Problem & Research Objectives

Marketing Research ProcessStep 1. Defining the Problem & Research Objectives

ExploratoryResearch

DescriptiveResearch

CausalResearch

•Test hypotheses about cause- and-effect relationships.

Gathers preliminary information that will help define the problem

and suggest hypotheses.

•Describes such things as market potential for a product or attitudes and demographics of consumers

who buy the product.

Types & Levels of Information Needed

– preliminary information: identify issues

– problem definition– first stage of descriptive or

causal research

– expand understanding of factors

– describe phenomenon– representative sample

– test cause and effect hypothesis– experimentation

New Product Pricing Strategies

Market Skimming Setting a High Price

for a New Product to “Skim” Maximum Revenues from the Target Market.

Results in Fewer, But More Profitable Sales.

Market Skimming Setting a High Price

for a New Product to “Skim” Maximum Revenues from the Target Market.

Results in Fewer, But More Profitable Sales.

Use Under These Conditions:

• Product’s Quality and Image Must Support Its Higher Price.

• Costs Can’t be so High that They Cancel the Advantage of Charging More.

• Competitors Shouldn’t be Able to Enter Market Easily and Undercut the High Price.

New Product Pricing Strategies

Market Penetration

Setting a Low Price for a New Product in Order to “Penetrate” the Market Quickly and Deeply.

Attract a Large Number of Buyers and Win a Larger Market Share.

Market Penetration

Setting a Low Price for a New Product in Order to “Penetrate” the Market Quickly and Deeply.

Attract a Large Number of Buyers and Win a Larger Market Share.

Use Under These Conditions:• Market Must be Highly Price-

Sensitive so a Low Price Produces More Market Growth.

• Production/ Distribution Costs Must Fall as Sales Volume Increases.

• Must Keep Out Competition & Maintain Its Low Price Position or Benefits May Only be Temporary.

Strategy that Calls for Spending A Lot on Advertising and Consumer Promotion to Build Up (Pull) Consumer Demand.

Pull StrategyPull Strategy Strategy Selected Depends

on:

Type of Product-Market &

Product Life-Cycle

Stage

Strategy that Calls for Using the Salesforce and Trade Promotion to Push the Product Through the Channels.

Push StrategyPush Strategy

Communication Mix Strategies

Continuum of Possible Channel-Target Market Relationships

Intensive Intensive DistributionDistribution

Selective Selective DistributionDistribution

Exclusive Exclusive DistributionDistributionMany

OutletsOne Outlet

CigarettesCigarettesChewing GumChewing Gum

Auto PartsAuto PartsDry CleanersDry Cleaners

Men’s SuitsMen’s Suits

AutomobilesAutomobiles

MachineryMachinery

Rolls RoyceRolls RoyceDealerDealer

• Intensive Distribution: Maximise the number of points of sale

• Selective Distribution: Evaluate sales potential, competency and location

• Exclusive Distribution: Agreement to sell on a specific area

AdvertisingPR

Place(Distribution)

Personal Selling

Product

SalesPromotion

Promotion

Place

The Promotional Mix

Advertising Strategies

4P’s

Price

Direct MKG

Any Paid Form of Nonpersonal Presentation by an Identified Sponsor.

Any Paid Form of Nonpersonal Presentation by an Identified Sponsor.

The Marketing CommunicationsMix (Promotion Mix)The Marketing CommunicationsMix (Promotion Mix)

Advertising

Personal Selling

Sales Promotion Short-term Incentives to Encourage Sales.

Public RelationsBuilding Good Relations with Various Publics by Obtaining Favorable Publicity.

Direct MarketingDirect Communications With Individuals to Obtain an Immediate Response.

Personal Presentations by a Firm’s Sales Force.

Advertising Strategies

Basic Communication Model

Sender(Source)

Receiver(Consumer)

MessageChannel

(Medium)

Feedback

Advertising Strategies

What are the 4 main Com Objectives?

I… P… R… C…

Informative AdvertisingInform Consumers or Build Primary Demand

i.e CD Players

Comparison Advertising

Compares One Brand to Another

i.e. Avis vs. Hertz

Persuasive AdvertisingBuild Selective Demand

i.e Sony CD Players

Reminder AdvertisingKeeps Consumers Thinking

About a Producti.e. Coca-Cola

Advertising ObjectiveSpecific Communication Task Accomplished with a Specific

Target Audience During a Specific Period of Time

Setting Communication Objectives

Changes in Advertising Objectives during the Product Life Cycle

Advertising Strategies

Define objectives and plan the promotional campaign

Develop product awareness, stimulate generic demand, and attract distributors

Create product acceptance and brand preference if there are competitive products

Maintain and enhance brand loyalty convert buyers and distributors of competitive brands

Minimal expenditures just enough to phase product out

Sales

General promotion objective

Advertising strategy

Screen concepts, create advertisements, and plan media selection

primary demand advertising to get potential purchasers to try the product. trade advertising to introduce product

Extensive advertising expenditures emphasizing advantages of the product and brand

Reminder and emotional advertising and promotions to promote repeat purchases and differentiate brands

Minimal advertising expenditures emphasizing low price to reduce inventory

Pre-Pre-IntroductioIntroductionn

IntroductioIntroductionn GrowthGrowth

MaturityMaturity Decline Decline

Time